Introduction to Consignment Inventory (Part 1 of 3)

Consumption of the inventory is advised by the customer—at which time, it is invoiced.

Consignment and Epicor ERP v9 & v10Epicor ERP (v9 & v10) does not have a “consignment module” per se, but it does support consignment very well, with well-defined procedures. For example, the method described below has been used by multiple companies in the aerospace industry.

There are several deviations from this model that can cause it to malfunction. We conclude this post by highlighting those pitfalls so they are not pursued.

Consignment with MRP-Multi-Site AdvantagesBy setting up consignment in the manner described here, there are many advantages and processes that can be managed within Epicor ERP v9 or v10. These include:

Material requirements for future consignment deliveries are still calculated based on the forecast that is entered into consignment

The Required Initial SetupTo process consignment inventory, there are several modules required, as well as some specific setups.

Must have Material Requirements Planning (MRP)

Must have Multi-site

Must create a new “Plant” (in v9) or “Site” (in v10) to hold “Consignment Inventory”

Optional Setup ItemsThere are some decisions that are optional, depending on the customers, and the products that are shipping to those customers:

You can set up either one consignment plant/site for the entire company, or one consignment plant/site for eachCustomer Ship-To. The reason is:

You can alternatively create separate cost tables for each plant. This allows the plant to have its own average cost. However, many companies do not want this to happen, and tie the costs of the consignment plant to the main plant.

Pitfalls of Skipping Steps or Incorrect SetupAs stated above, there are several pitfalls that are potential causes for failure and should be avoided:

Some think that these consignment locations are supposed to be “non-net inventory”… this is not true. They must be considered “nettable” inventory in order for this to work.

Ignoring forecasts, or putting forecasts in the wrong location.

Forgetting transfer lead time.

Entering sales orders against the wrong plant. All consignment usage must be “shipped” (consumed) from the consignment plant.

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